Weak CD sales leave WMG singing blues

Warner's quarterly revenue down 58%

Rapidly eroding CD sales and slower-than-expected digital growth hampered Warner Music Group’s perf in fiscal 2007, as shown in weak fourth-quarter and full-year results announced Thursday.

Quarterly net for the music distrib, with a catalog ranging from Josh Groban to Linkin Park to Led Zeppelin, dropped 58% to $5 million, from $12 million in the year-ago period ending Sept. 30. Revenue for the period inched up 2% to $869 million but on a full-year basis revenues slid 4% to $3.4 billion. For the full year, the company swung to a net loss of $21 million from a net profit of $60 million.

The numbers, however, were slightly better than Wall Street expectations.

The quarterly numbers reflected $9 million in restructuring costs and a $12 million benefit from a Napster settlement with Bertelsmann AG. The year-ago quarter had a $13 million bump from a settlement with Kazaa.

Revenue from the dominant recorded-music segment treaded water, growing a shade under 1% to $736 million, but revenue was off slightly when currency exchange rates are factored in. Sales have also been weak overseas, dropping 6% to $340 million in the quarter.

Top sellers for the period included James Blunt, Nickelback and Linkin Park.

Digital revenue rose 30% for the year, to $460 million, but still comprises just 14% of the company’s total.

Chairman and chief exec Edgar Bronfman called 2007, a year in which industrywide CD sales have plummeted 14%, “a year of real challenge in the recorded music industry.” But he stressed that opportunities exist for music companies with a “progressive strategy in place and the passion to get them there.”

Warner Music, Bronfman said, would focus on a few core areas in 2008: cost containment, broader offerings for consumers and expanding the business model.

Execs also touted the fact that costs related to a massive restructuring announced in May came in at $63 million, below the previously stipulated range of $65 million to $80 million.

That upbeat figure, along with the fact that earnings exceeded Wall Street estimates, helped send the stock up 8% to close at $7.73 on more than double average volume. Shares have recovered a bit in recent days after a 30% drop in the first three weeks of November.

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 0

Marketplace

    Leave a Reply

    No Comments

    Comments are moderated. They may be edited for clarity and reprinting in whole or in part in Variety publications.

    Fill in your details below or click an icon to log in:

    WordPress.com Logo

    You are commenting using your WordPress.com account. Log Out / Change )

    Twitter picture

    You are commenting using your Twitter account. Log Out / Change )

    Facebook photo

    You are commenting using your Facebook account. Log Out / Change )

    Google+ photo

    You are commenting using your Google+ account. Log Out / Change )

    Connecting to %s

    More Music News from Variety

    Loading